New Zealand Dollar: How Has China Helped to Boost the NZD?

How Has China Helped to Boost the NZD?

The New Zealand dollar (NZD) has found support this week after actions taken by China. With China being one of the NZD’s largest traders, actions taken by the second largest economy in the world has influence on the shift of the currency. China announced a decision to cut tariffs on more than 1,500 US goods which offered support to the NZD on Thursday morning. Trade tensions between the US and China have showed anguish in recent months but this step taken by China appears to show tensions fading and as a result, has given investors a newfound incentive to buy into the risk-sensitive New Zealand dollar.

New Zealand Dollar Gains After China Lifts US Tariffs

NZD gained yesterday morning after China announced that it will lift tariffs on around 1500 US goods. The move was a positive one which suggests that the world’s two largest economies may finally be seeing eye-to-eye on trade. After months of tensions, the US and China signed their phase one trade deal last month which resolved some but not all of the twos trade tensions. Nevertheless, the positive move by China has give the NZD support as it now makes the currency more attractive to investors as it is heavily linked in trade with the Chinese economy.

Global Growth Worries Remain but Could Reduce If Coronavirus Vaccine Is Created

Meanwhile, global tensions have escalated over the past couple of weeks after the coronavirus rocked the market and saw death tolls rise into triple figures. The economic impact of the outbreak remains to be seen, but investors are certainly aware of the slowdown it could cause, particularly in China. With the news of a breakthrough in the treatment for the disease, the market sentiment lifted earlier in the week which helped both the Chinese economy as well as NZD. Though the virus has still not been eradicated, optimism is flowing through the market that the disease can be controlled in the near-term which has leant support to risk-sensitive currencies like the NZD.

NZD Waits on Reserve Bank of New Zealand Decision

As the coronavirus begins to slowly reduce in fears, the New Zealand dollar could find a fresh rallying point on the back of the first quarter business inflation expectations index. Markets expect a slight increase in expectations in Q1, offering some support for the economy. Investors see little chance of the central bank cutting interest rates, but any fresh signs of policymaker dovishness would weigh heavily on the New Zealand dollar.

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